What Should US Tech’s Sourcing Strategy be?

US Tech is considering discontinue the cooperation with its primary product supplier: TaiSource. The two main reasons that drive the company for doing so are (1) reducing cost and broaden the market by collaborating with a new Chinese supplier; (2) eliminating the threat of a future strong competitor who knows almost everything about US Tech’s products. After carefully examining the entire situation, we hold that US Tech should find an alternative Chinese supplier to cooperate while keeping the relationship with TaiSource.

Several aspects that US Tech needs to take into consideration are as follows:

First of all, the company should carefully deal with the trusting relationship that formed between US Tech and TaiSource. Although the trusting relationship with suppliers is important, as Bruce said, we think that the exclusive and trusting supply relationship with TaiSource is vulnerable. Bruce K. Riggs argues that Greg, the chief global sourcing officer at US Tech, needs to realize that an exclusive supply relationship with TaiSource is outdated and may no longer help US Tech competitively. With hiring a new CMO, TaiSource shows a clear signal that they are willing to launch their own product in the near future. Once it decides to do that, TaiSource would be one of USTech’s biggest rivals. As Barry C. Lynn mentioned, although the relationship with TaiSource looked great on the bottom line, the result was to empower a new competitor.

However, Wang Dong sheng, the chairman and CEO of BOE Technology Group, advises Greg to work on his relationship with Tai Source. Even USTech can find new suppliers either in Taiwan or mainland China, at least it will take a lot of time to build relationships and trust with the news. It would be unwise for Greg to abandon TaiSource simply because of the current strains.